UNITED STATES

SECURITIES AND EXCHANGE COMMISSION



Washington, DC  20549



FORM 10-Q



[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



For the Quarter Ended September 30, 2018



[   ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



Commission File Number

001-09071



BBX Capital Corporation

(Exact name of registrant as specified in its charter)





 

 

Florida

 

59‑2022148

(State or other jurisdiction of incorporation or organization)

 

(I.R.S Employer Identification No.)







 

 

401 East Las Olas Boulevard, Suite 800

 

 

Fort Lauderdale, Florida

 

33301

(Address of principal executive office)

 

(Zip Code)









(954) 940-4900

(Registrant's telephone number, including area code)



Not Applicable

(Former name, former address and former fiscal year, if changed since last report)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



YES [X]NO [   ]



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).



YES [X]NO [   ]



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.





 

 

 

Large accelerated filer [ ]

Accelerated filer[X]

Non-accelerated filer [ ]

Smaller reporting company [ ] 

Emerging growth company [ ]

 

 

 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.[    ]



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



YES [   ]NO [ X ]



The number of shares outstanding of each of the registrant’s classes of common stock as of November 1, 2018 is as follows:

 

Class A Common Stock of $.01 par value,  79,578,730 shares outstanding.
Class B Common Stock of $.01 par value, 17,461,655 shares outstanding.



 


 

 





 

 



 

 



 

 

BBX Capital Corporation

TABLE OF CONTENTS



Part I.



 

 

Item 1.

Financial Statements

 



 

 



Condensed Consolidated Statements of Financial Condition as of September 30, 2018 and December 31, 2017 - Unaudited



 

 



Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2018 and 2017 - Unaudited



 

 



Condensed Consolidated Statements of Changes in Equity for the Nine Months Ended September 30, 2018 - Unaudited



 

 



Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017 - Unaudited



 

 



Notes to Condensed Consolidated Financial Statements - Unaudited



 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

43 



 

 

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

74 



 

 

Item 4.

Controls and Procedures

74 



 

 

Part II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

75 



 

 

Item 1A.

Risk Factors

75 



 

 

Item 6.

Exhibits

75 



 

 



Signatures

76 





  

 

 

 


 

 





PART I  FINANCIAL INFORMATION



Item 1. Financial Statements







 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Financial Condition - Unaudited

(In thousands, except share data)



 

 

 

 



 

 

 

December 31,



 

September 30, 2018

 

2017
*As Adjusted

ASSETS

 

 

 

 

Cash and cash equivalents

$

369,512 

 

362,526 

Restricted cash ($17,081 in 2018 and $19,488 in 2017 in variable

 

 

 

 

interest entities ("VIEs"))

 

55,710 

 

46,721 

Notes receivable, net ($308,221 in 2018 and $279,188 in 2017 in VIEs)

 

439,484 

 

426,858 

Trade inventory

 

21,706 

 

23,902 

Vacation ownership interest ("VOI") inventory

 

325,532 

 

281,291 

Real estate ($20,684 in 2018 and $27,828 in 2017 held for sale)

 

52,579 

 

68,536 

Investments in unconsolidated real estate joint ventures

 

42,550 

 

51,234 

Property and equipment, net

 

133,267 

 

111,929 

Goodwill

 

39,482 

 

39,482 

Intangible assets, net

 

71,609 

 

70,449 

Other assets

 

126,336 

 

122,753 

Total assets

$

1,677,767 

 

1,605,681 



 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable

$

26,677 

 

31,370 

Deferred income 

 

15,509 

 

16,893 

Escrow deposits

 

31,957 

 

21,079 

Other liabilities

 

112,133 

 

103,464 

Receivable-backed notes payable - recourse

 

97,770 

 

84,697 

Receivable-backed notes payable - non-recourse (in VIEs)

 

335,680 

 

336,421 

Notes payable and other borrowings

 

197,177 

 

144,114 

Junior subordinated debentures

 

136,231 

 

135,414 

Deferred income taxes

 

68,453 

 

47,968 

Redeemable 5% cumulative preferred stock of $.01 par value; authorized 15,000 shares;

 

 

 

 

issued and outstanding 10,000 shares in 2018 and 15,000 shares in 2017 with a stated value of $1,000 per share

 

9,390 

 

13,974 

Total liabilities

 

1,030,977 

 

935,394 

Commitments and contingencies (See Note 11)

 

 

 

 

Redeemable noncontrolling interest

 

2,844 

 

2,765 

Equity:

 

 

 

 

Preferred stock of $.01 par value; authorized 10,000,000 shares

 

 -

 

 -

Class A Common Stock of $.01 par value; authorized 150,000,000 shares;

 

 

 

 

issued and outstanding 79,417,242 in 2018 and 85,689,163 in 2017 

 

794 

 

857 

Class B Common Stock of $.01 par value; authorized 20,000,000 shares;

 

 

 

 

issued and outstanding 13,798,718 in 2018 and 13,963,200 in 2017

 

138 

 

140 

Additional paid-in capital

 

175,896 

 

229,379 

Accumulated earnings

 

374,405 

 

353,384 

Accumulated other comprehensive income

 

1,507 

 

1,708 

Total shareholders' equity

 

552,740 

 

585,468 

Noncontrolling interests

 

91,206 

 

82,054 

Total equity

 

643,946 

 

667,522 

Total liabilities and equity

$

1,677,767 

 

1,605,681 



 

 

 

 

*  See Note 1 for a summary of adjustments.

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited













1

 


 

 





















 

 

 

 

 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Operations and Comprehensive Income - Unaudited

(In thousands, except per share data)



 

 

 

 



 

For the Three Months Ended

 

For the Nine Months Ended



 

September 30,

 

September 30,



 

2018

 

2017
*As Adjusted

 

2018

 

2017
*As Adjusted

Revenues:

 

 

 

 

 

 

 

 

Sales of VOIs 

$

70,698 

 

62,453 

 

195,412 

 

176,094 

Fee-based sales commissions

 

61,641 

 

69,977 

 

167,581 

 

179,046 

Other fee-based services

 

31,057 

 

27,386 

 

89,472 

 

83,442 

Cost reimbursements

 

16,900 

 

14,097 

 

47,157 

 

40,660 

Trade sales

 

43,803 

 

44,718 

 

126,114 

 

96,369 

Sales of real estate inventory

 

7,478 

 

-

 

17,138 

 

 -

Interest income

 

21,157 

 

21,035 

 

63,738 

 

63,065 

Net (losses) gains on sales of real estate assets

 

(4)

 

(18)

 

4,798 

 

1,668 

Other revenue

 

1,673 

 

1,248 

 

4,282 

 

3,652 

Total revenues

 

254,403 

 

240,896 

 

715,692 

 

643,996 

Costs and Expenses:

 

 

 

 

 

 

 

 

Cost of VOIs sold

 

11,237 

 

6,444 

 

19,838 

 

11,352 

Cost of other fee-based services

 

19,937 

 

17,182 

 

53,983 

 

48,663 

Cost reimbursements

 

16,900 

 

14,097 

 

47,157 

 

40,660 

Cost of trade sales

 

28,960 

 

31,810 

 

88,051 

 

73,773 

Cost of real estate inventory sold

 

4,655 

 

 -

 

11,283 

 

 -

Interest expense

 

11,130 

 

9,483 

 

30,732 

 

27,580 

Recoveries from loan losses, net

 

(443)

 

(2,005)

 

(7,236)

 

(6,098)

Asset impairments, net

 

191 

 

1,506 

 

527 

 

1,551 

Net gains on cancellation of junior

 

 

 

 

 

 

 

 

subordinated debentures

 

 -

 

 -

 

 -

 

(6,929)

Reimbursements of litigation costs and penalty

 

 -

 

(2,113)

 

 -

 

(11,719)

Selling, general and administrative expenses

 

143,558 

 

146,842 

 

410,490 

 

395,489 

Total costs and expenses

 

236,125 

 

223,246 

 

654,825 

 

574,322 

Equity in net earnings of unconsolidated

 

 

 

 

 

 

 

 

real estate joint ventures

 

373 

 

2,105 

 

1,165 

 

8,428 

Foreign exchange gain (loss)

 

76 

 

(105)

 

91 

 

(312)

Income before income taxes

 

18,727 

 

19,650 

 

62,123 

 

77,790 

Provision for income taxes

 

(6,742)

 

(8,126)

 

(21,997)

 

(30,021)

Net income

 

11,985 

 

11,524 

 

40,126 

 

47,769 

Less: Net income attributable to noncontrolling interests

 

5,806 

 

3,398 

 

16,324 

 

9,488 

Net income attributable to shareholders

$

6,179 

 

8,126 

 

23,802 

 

38,281 



 

 

 

 

 

 

 

 

Basic earnings per share

$

0.07 

 

0.08 

 

0.25 

 

0.39 

Diluted earnings per share

$

0.06 

 

0.08 

 

0.24 

 

0.36 

Basic weighted average number of common

 

 

 

 

 

 

 

 

shares outstanding

 

93,193 

 

98,073 

 

95,722 

 

98,408 

Diluted weighted average number of common and

 

 

 

 

 

 

 

 

common equivalent shares outstanding

 

96,576 

 

106,021 

 

98,971 

 

105,802 

Cash dividends declared per Class A common share

$

0.010 

 

0.0075 

 

0.030 

 

0.0225 

Cash dividends declared per Class B common share

$

0.010 

 

0.0075 

 

0.030 

 

0.0225 



 

 

 

 

 

 

 

 

Net income

$

11,985 

 

11,524 

 

40,126 

 

47,769 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

Unrealized (losses) gains on securities available for sale

 

(11)

 

16 

 

(11)

 

62 

Foreign currency translation adjustments

 

65 

 

418 

 

62 

 

301 

Other comprehensive income, net

 

54 

 

434 

 

51 

 

363 

Comprehensive income, net of tax

 

12,039 

 

11,958 

 

40,177 

 

48,132 

Less: Comprehensive income attributable

 

 

 

 

 

 

 

 

to noncontrolling interests

 

5,806 

 

3,398 

 

16,324 

 

9,488 

Comprehensive income attributable to shareholders

$

6,233 

 

8,560 

 

23,853 

 

38,644 



 

 

 

 

 

 

 

 

*  See Note 1 for a summary of adjustments.

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited



2

 


 

 















 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statement of Changes in Equity - Unaudited

For the Nine Months Ended September 30, 2018

(In thousands)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Shares of

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Common Stock

 

Common Stock

 

 

 

 

 

Accumulated

 

 

 

 

 

 



Outstanding

 

Amount

 

Additional

 

 

 

Other

 

Total

 

Non-

 

 



Class

 

Class

 

Paid-in

 

Accumulated

 

Comprehensive

 

Shareholders'

 

controlling

 

Total



A

B

 

A

B

 

Capital

 

Earnings

 

Income

 

Equity

 

Interests

 

Equity

As adjusted balance, December 31, 2017 *

85,689  13,963 

$

857  140 

 

229,379 

 

353,384 

 

1,708 

 

585,468 

 

82,054 

 

667,522 

Cumulative effect from the adoption of ASU 2016-01

 -

 -

 

 -

 -

 

 -

 

252 

 

(252)

 

 -

 

 -

 

 -

Net income excluding $58 of loss attributable to redeemable noncontrolling interest

 -

 -

 

 -

 -

 

 -

 

23,802 

 

 -

 

23,802 

 

16,382 

 

40,184 

Other comprehensive income

 -

 -

 

 -

 -

 

 -

 

 -

 

51 

 

51 

 

 -

 

51 

Distributions to noncontrolling interests

 -

 -

 

 -

 -

 

 -

 

 -

 

 -

 

 -

 

(8,263)

 

(8,263)

Increase in noncontrolling interest from loan foreclosure

 -

 -

 

 -

 -

 

 -

 

 -

 

 -

 

 -

 

704 

 

704 

Purchase of noncontrolling interest

 -

 -

 

 -

 -

 

(587)

 

 -

 

 -

 

(587)

 

329 

 

(258)

Class A Common Stock cash dividends declared

 -

 -

 

 -

 -

 

 -

 

(2,492)

 

 -

 

(2,492)

 

 -

 

(2,492)

Class B Common Stock cash dividends declared

 -

 -

 

 -

 -

 

 -

 

(541)

 

 -

 

(541)

 

 -

 

(541)

Repurchase and retirement of Common Stock from tender offer

(6,486)

 -

 

(65)

 -

 

(60,076)

 

 -

 

 -

 

(60,141)

 

 -

 

(60,141)

Repurchase and retirement of Common Stock from vesting of restricted awards

(375) (137)

 

(4) (1)

 

(3,777)

 

 -

 

 -

 

(3,782)

 

 -

 

(3,782)

Conversion of Common Stock from Class B to Class A

27  (27)

 

(1)

 

 -

 

 -

 

 -

 

 -

 

 -

 

 -

Issuance of Common Stock from vesting of restricted stock awards

535 

 -

 

 -

 

(5)

 

 -

 

 -

 

 -

 

 -

 

 -

Issuance of Common Stock from exercise of options

27 

 -

 

 -

 -

 

245 

 

 -

 

 -

 

245 

 

 -

 

245 

Share-based compensation

 -

 -

 

 -

 -

 

10,717 

 

 -

 

 -

 

10,717 

 

 -

 

10,717 

Balance, September 30, 2018

79,417  13,799 

$

794  138 

 

175,896 

 

374,405 

 

1,507 

 

552,740 

 

91,206 

 

643,946 

*See Note 1 for a summary of adjustments.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited







3

 


 

 











 

 

 

 



 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Cash Flows - Unaudited

(In thousands)



 

 

 

 



 

For the Nine Months Ended



 

September 30,



 

2018

 

2017

Operating activities:

 

 

 

 

Net income

$

40,126 

 

47,769 

Adjustment to reconcile net income to net cash

 

 

 

 

provided by operating activities:

 

 

 

 

Recoveries from loan losses and asset impairments, net

 

(6,709)

 

(4,547)

Provision for notes receivable allowances

 

35,866 

 

32,066 

Depreciation, amortization and accretion, net

 

18,550 

 

15,066 

Share-based compensation expense

 

10,717 

 

10,119 

Net gains on sales of real estate held-for-sale

 

(4,798)

 

(1,668)

Equity in earnings of unconsolidated real estate joint ventures

 

(1,165)

 

(8,428)

Return on investment in unconsolidated real estate joint ventures

 

5,233 

 

11,465 

Increase in deferred income tax

 

20,465 

 

30,279 

Net gains on cancellation of junior subordinated debentures

 

 -

 

(6,929)

Interest accretion on redeemable 5% cumulative preferred stock

 

854 

 

901 

Increase in notes receivable

 

(48,492)

 

(29,526)

Increase in VOI inventory

 

(23,405)

 

(30,707)

Decrease (increase) in trade inventory

 

2,286 

 

(5,613)

Decrease (increase) in real estate inventory

 

9,990 

 

(7,733)

Increase in other assets

 

(24,705)

 

(12,657)

Increase in other liabilities

 

8,774 

 

13,323 

Net cash provided by operating activities

 

43,587 

 

53,180 

Investing activities:

 

 

 

 

Return of investment in unconsolidated real estate joint ventures

 

6,586 

 

888 

Investments in unconsolidated real estate joint ventures

 

(1,755)

 

(2,645)

Repayment of loans receivable

 

17,930 

 

9,522 

Proceeds from sales of real estate held-for-sale

 

17,121 

 

10,601 

Additions to real estate held-for-sale and held-for-investment

 

(1,102)

 

(933)

Purchases of property and equipment

 

(33,316)

 

(14,158)

Proceeds from the sale of property and equipment

 

569 

 

 -

Cash paid for acquisition, net of cash received

 

 -

 

(58,418)

Decrease in cash from other investing activities

 

(5,072)

 

(373)

Net cash provided by (used in) investing activities

 

961 

 

(55,516)

Financing activities:

 

 

 

 

Repayments of notes payable and other borrowings

 

(152,204)

 

(197,581)

Proceeds from notes payable and other borrowings

 

196,439 

 

206,884 

Redemption of junior subordinated debentures

 

 -

 

(11,438)

Payments for debt issuance costs

 

(1,131)

 

(3,217)

Payments of interest on redeemable 5% cumulative preferred stock

 

(438)

 

(563)

Repurchase and retirement of Class A common stock

 

(60,141)

 

(6,213)

Purchase of noncontrolling interest

 

(258)

 

 -

Proceeds from the exercise of stock options

 

245 

 

62 

Dividends paid on common stock

 

(2,822)

 

(2,136)

Distributions to noncontrolling interest

 

(8,263)

 

(3,920)

Net cash used in financing activities

 

(28,573)

 

(18,122)

Increase (decrease) in cash, cash equivalents and restricted cash

 

15,975 

 

(20,458)

Cash, cash equivalents and restricted cash at beginning of period 

 

409,247 

 

346,317 

Cash, cash equivalents and restricted cash at end of period 

$

425,222 

 

325,859 

Continued











4

 


 

 















 

 

 

 



 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Cash Flows -- Unaudited

(In thousands)



 

 

 

 



 

For the Nine Months Ended



 

September 30,



 

2018

 

2017

Supplemental cash flow information:

 

 

 

 

Interest paid on borrowings

$

27,807 

 

21,392 

Income taxes paid

 

3,103 

 

2,570 

Supplementary disclosure of non-cash investing and financing activities:

 

 

 

 

Construction funds receivable transferred to real estate

 

8,716 

 

8,259 

Acquisition of VOI inventory, property and equipment for notes payable

 

24,258 

 

 -

Reduction in redeemable 5% cumulative preferred stock

 

4,862 

 

 -

Reduction in note receivable from holder of

 

 

 

 

redeemable 5% cumulative preferred stock

 

(5,000)

 

 -

Property and equipment transferred to real estate

 

 -

 

6,181 

Decrease in deferred tax liabilities due to cumulative effect of excess

 

 

 

 

tax benefits

 

 -

 

3,054 

Repurchase and retirement of shares of common stock in connection

 

 

 

 

with share based compensation withholding tax obligations

 

3,782 

 

4,028 

Reconciliation of cash, cash equivalents and restricted cash:

 

 

 

 

Cash and cash equivalents

 

369,512 

 

264,380 

Restricted cash

 

55,710 

 

61,479 

Total cash, cash equivalents, and restricted cash

$

425,222 

 

325,859 



 

 

 

 

See Notes to Condensed Consolidated Financial Statements -- Unaudited

















 

5

 


 

 





BBX Capital Corporation

Notes to Condensed Consolidated Financial Statements - Unaudited





1.    Basis of Financial Statement Presentation



BBX Capital Corporation and its subsidiaries (the “Company” or, unless otherwise indicated or the context otherwise requires, “we,” “us,” or “our”) is a Florida-based diversified holding company. BBX Capital Corporation as a standalone entity without its subsidiaries is referred to as “BBX Capital.” The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, these financial statements do not include all of the information and disclosures required by GAAP for complete financial statements.



In management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which include normal recurring adjustments, that are necessary for a fair statement of the condensed consolidated financial condition of the Company at September 30, 2018; the condensed consolidated results of operations and comprehensive income of the Company for the three and nine months ended September 30, 2018 and 2017; the condensed consolidated changes in equity of the Company for the nine months ended September 30, 2018; and the condensed consolidated cash flows of the Company for the nine months ended September 30, 2018 and 2017.  Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 or any other future period.



These unaudited condensed consolidated financial statements and related notes are presented as permitted by Form 10-Q and should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 9, 2018



The consolidated financial statements include the accounts of all of BBX Capital’s wholly-owned subsidiaries, other entities in which BBX Capital or its subsidiaries hold controlling financial interests, and any VIEs in which BBX Capital or one of its consolidated subsidiaries is deemed the primary beneficiary of the VIE. All significant inter-company accounts and transactions have been eliminated in consolidation. 



Certain amounts for prior periods have been reclassified to conform to the current period’s presentation. The Company’s adoption of the new revenue recognition accounting standard on a full retrospective basis required the Company to restate certain previously reported results. For further details regarding the impact of adopting new accounting pronouncements, see “Recently Adopted Accounting Pronouncements” section below. In addition, the Company also reclassified $19.5 million of loans receivable to other assets in its condensed consolidated statement of financial condition as of December 31, 2017.



The Company’s principal investments include Bluegreen Vacations Corporation (“Bluegreen” or “Bluegreen Vacations”), real estate and real estate joint ventures, and middle market operating businesses. 



Bluegreen is a leading vacation ownership company that markets and sells VOIs and manages resorts in leisure and urban destinations. Bluegreen’s resort network includes 45 Club Resorts (resorts in which owners in the Bluegreen Vacation Club (“Vacation Club”) have the right to use most of the units in connection with their VOI ownership) and 24 Club Associate Resorts (resorts in which owners in Bluegreen’s Vacation Club have the right to use a limited number of units in connection with their VOI ownership). Bluegreen’s Club Resorts and Club Associate Resorts are primarily located in popular, high-volume, “drive-to” vacation locations, including Orlando, Las Vegas, Myrtle Beach and Charleston, among others. Through Bluegreen’s points-based system, the approximately 216,000 owners in Bluegreen’s Vacation Club have the flexibility to stay at units available at any of its resorts and have access to approximately 11,100 other hotels and resorts through partnerships and exchange networks. Bluegreen’s sales and marketing platform is supported by exclusive marketing relationships with nationally-recognized consumer brands, such as Bass Pro and Choice Hotels. These marketing relationships drive sales within Bluegreen’s core demographic.



Prior to 2009, Bluegreen’s vacation ownership business consisted solely of the sale of VOIs in resorts that it developed or acquired. While it continues to conduct such sales and development activities, Bluegreen now also derives a

6

 


 

 

significant portion of its revenue from its capital-light business model, which utilizes Bluegreen’s expertise and infrastructure to generate both VOI sales and recurring revenue from third parties without the significant capital investment generally associated with the development and acquisition of resorts. Bluegreen’s capital-light business activities include sales of VOIs owned by third-party developers pursuant to which Bluegreen is paid a commission (“fee-based sales”) and sales of VOIs that it purchases under just-in-time (“JIT”) arrangements with third-party developers or from secondary market sources. In addition, Bluegreen provides resorts and resort developers with other fee-based services, including resort management, mortgage servicing, title services and construction management. Bluegreen also offers financing to qualified VOI purchasers, which generates significant interest income.



Prior to the fourth quarter of 2017, Woodbridge Holdings, LLC (“Woodbridge”), a wholly-owned subsidiary of BBX Capital, owned 100% of Bluegreen’s common stock. During the fourth quarter of 2017, Bluegreen completed an initial public offering (“IPO”) of its common stock in which Bluegreen sold to the public 3,736,723 shares of its common stock and Woodbridge, as a selling shareholder, sold to the public 3,736,722 shares of Bluegreen’s common stock. As a result of Bluegreen’s IPO, BBX Capital currently owns 90% of Bluegreen’s common stock through Woodbridge.



The Company’s real estate investments include real estate joint ventures and the acquisition, development, ownership, financing, and management of real estate. The Company’s investments in middle market operating businesses include Renin Holdings, LLC (“Renin”), a company that manufactures products for the home improvement industry, and investments in confectionery businesses through its wholly-owned subsidiary, BBX Sweet Holdings, LLC (“BBX Sweet Holdings”). The Company’s investments in confectionery businesses include IT’SUGAR, LLC (“IT’SUGAR”), a specialty candy retailer with over 90 retail locations in 26 states and Washington, D.C. that was acquired by BBX Sweet Holdings in June 2017.



BBX Capital has two classes of common stock. Holders of the Class A common stock are entitled to one vote per share, which in the aggregate represents 22% of the combined voting power of the Class A common stock and the Class B common stock. Class B common stock represents the remaining 78% of the combined vote. The percentage of total common equity represented by Class A and Class B common stock was 85% and 15%, respectively, at September 30, 2018. Class B common stock is convertible into Class A common stock on a share for share basis at any time at the option of the holder.



Recently Adopted Accounting Pronouncements



The Financial Accounting Standards Board (“FASB”) has issued the following Accounting Standards Updates (“ASU”) and guidance relevant to the Company’s operations which were adopted as of January 1, 2018:



ASU No. 2014-09 –  Revenue Recognition (Topic 606): In May 2014, the FASB issued a new standard related to revenue recognition (as subsequently clarified and amended by various ASUs). Under the new standard, revenue is recognized when an entity satisfies a performance obligation by transferring to a customer control over promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.



The Company adopted the standard on January 1, 2018 under the full retrospective method, and accordingly, results for prior periods have been adjusted to apply the new standard as shown below.



The adoption of the standard affected Bluegreen in the following areas: (i) gross versus net presentation for payroll and insurance premium reimbursements related to resorts managed by Bluegreen and on behalf of third parties and (ii) the timing of the recognition of VOI revenue related to the removal of certain bright line tests regarding the determination of the adequacy of the buyer’s commitment under prior industry-specific guidance. Bluegreen concluded that the recognition of fee-based sales commissions, ancillary revenues, and rental revenues remained materially unchanged.



The adoption of the standard on the Company’s real estate activities results in recognizing revenue sooner for contingent consideration on sales of real estate inventory.



The adoption of the standard did not materially affect revenue recognition associated with the Company’s trade sales. Retail trade sales performance obligations are generally satisfied at the time of the sales transaction as customers of the retail business typically pay in cash at the time of transfer of the promised goods, while wholesale trade sales performance obligations are generally satisfied when the promised goods are shipped by the Company or received by the customer. However, the Company has historically recognized shipping and handling costs in selling, general and

7

 


 

 

administration expenses, and upon the adoption of the standard, the Company began accounting for such costs as a fulfillment cost in cost of trade sales.



The Company has elected to use the following practical expedients in connection with the adoption of ASU 2014-09:



·

We utilize the transaction price upon completion of the contract for certain contracts with customers; 

·

We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less or unsatisfied performance obligations or unsatisfied promises to transfer a distinct good or service that forms a part of a single performance obligation recognized over time. See Note 2 for a further description of variable consideration identified in contracts with customers;

·

We expense all marketing and sales costs as incurred;

·

We exclude from the transaction price all taxes assessed by a governmental authority that are imposed on a specified transaction concurrent with the closing thereof and are collected by the Company from a customer;

·

We do not disclose remaining performance obligations for variable consideration when the variable consideration is allocated entirely to a wholly unsatisfied performance obligation;

·

We do not disclose remaining performance obligations when revenue is recognized based on the Company’s right to invoice;

·

We account for shipping and handling activities that occur after the control of the goods is transferred to a customer as fulfillment activities instead of a separate performance obligation;

·

We recognize incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset is one year or less; and

·

We do not adjust the transaction price for the effects of a significant financial component if we expect, at the contract inception, that the performance obligations will be satisfied within one year or less.



ASU No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20). This standard provides guidance on the recognition of gains and losses from the transfer of nonfinancial assets to non-customers and requires that an entity must identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a non-customer or counterparty and derecognize each asset when the counterparty obtains control of the asset.



This standard significantly changed the guidance on the transfer of real estate to unconsolidated joint ventures. Under prior guidance, the transfer of real estate to an unconsolidated joint venture was accounted for as a partial sale, resulting in the recognition of a partial gain, and the noncontrolling interest retained was measured at historical cost, resulting in a basis adjustment to the seller’s investment in the joint venture. In addition, the partial gain could be deferred if the sale did not satisfy certain criteria for gain recognition. As a result, the Company previously accounted for the transfer of land to certain unconsolidated real estate joint ventures for initial capital contributions as partial sales, resulting in deferred gains and joint venture basis adjustments. However, under the new standard, the full gain is recognized upon the transfer of control of real estate to an unconsolidated joint venture, and any noncontrolling interest retained is measured at fair value.    



8

 


 

 

The Company adopted the standard on January 1, 2018 under the full retrospective method and, accordingly, prior years’ results have been adjusted to apply the new standard as shown below.



The following represents the impact of the adoption of ASU 2014-09 and ASU 2017-05 on our consolidated statements of financial condition as of December 31, 2017 and December 31, 2016 and consolidated statements of operations for the three and nine months ended September 30, 2017 and the years ended December 31, 2017 and 2016 (in thousands, except per share data): 





 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

For the Three Months Ended September 30, 2017



 

Prior to Adoption

 

ASU 2014-09 Adjustments

 

ASU 2017-05 Adjustments

 

As Adjusted

Statement of Operations:

 

 

 

 

 

 

 

 

Sales of VOIs

$

61,687 

 

766 

 

 -

 

62,453 

Cost reimbursements

 

 -

 

14,097 

 

 -

 

14,097 

Cost reimbursements

 

 -

 

14,097 

 

 -

 

14,097 

Cost of VOIs sold

 

6,284 

 

160 

 

 -

 

6,444 

Trade sales

 

44,877 

 

(159)

 

 -

 

44,718 

Net loss on sales of real estate assets

 

(18)

 

 -

 

 -

 

(18)

Cost of trade sales

 

29,494 

 

2,316 

 

 -

 

31,810 

Selling, general and administrative expenses

 

149,021 

 

(2,179)

 

 -

 

146,842 

Equity in earnings of unconsolidated

 

 

 

 

 

 

 

 

real estate joint ventures

 

2,451 

 

 -

 

(346)

 

2,105 

Income before income taxes

 

19,686 

 

310 

 

(346)

 

19,650 

Provision for income taxes

 

(8,195)

 

(64)

 

133 

 

(8,126)

Net income

 

11,491 

 

246 

 

(213)

 

11,524 

Less: Net income attributable to

 

 

 

 

 

 

 

 

noncontrolling interests

 

3,256 

 

142 

 

 -

 

3,398 

Net income attributable to shareholders

$

8,235 

 

104 

 

(213)

 

8,126 

Basic earnings per share

$

0.08 

 

 

 

 

 

0.08 

Diluted earnings per share

$

0.08 

 

 

 

 

 

0.08 









 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

For the Nine Months Ended September 30, 2017



 

Prior to Adoption

 

ASU 2014-09 Adjustments

 

ASU 2017-05 Adjustments

 

As Adjusted

Statement of Operations:

 

 

 

 

 

 

 

 

Sales of VOIs

$

172,839 

 

3,255 

 

 -

 

176,094 

Cost reimbursements

 

 -

 

40,660 

 

 -

 

40,660 

Cost reimbursements

 

 -

 

40,660 

 

 -

 

40,660 

Cost of VOIs sold

 

10,737 

 

615 

 

 -

 

11,352 

Trade sales

 

96,831 

 

(462)

 

 -

 

96,369 

Net gains on sales of real estate assets

 

2,161 

 

 -

 

(493)

 

1,668 

Cost of trade sales

 

68,027 

 

5,746 

 

 -

 

73,773 

Selling, general and administrative expenses

 

400,845 

 

(5,356)

 

 -

 

395,489 

Equity in earnings of unconsolidated

 

 

 

 

 

 

 

 

real estate joint ventures

 

9,620 

 

 -

 

(1,192)

 

8,428 

Income before income taxes

 

77,687 

 

1,788 

 

(1,685)

 

77,790 

Provision for income taxes

 

(30,028)

 

(643)

 

650 

 

(30,021)

Net income

 

47,659 

 

1,145 

 

(1,035)

 

47,769 

Less: Net income attributable to

 

 

 

 

 

 

 

 

noncontrolling interests

 

9,467 

 

21 

 

 -

 

9,488 

Net income attributable to shareholders

$

38,192 

 

1,124 

 

(1,035)

 

38,281 

Basic earnings per share

$

0.39 

 

 

 

 

 

0.39 

Diluted earnings per share

$

0.36 

 

 

 

 

 

0.36 



9

 


 

 











 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

As of and for the Year Ended December 31, 2017



 

As Previously Reported

 

ASU 2014-09 Adjustments

 

ASU 2017-05 Adjustments

 

As Adjusted

Statement of Financial Condition:

 

 

 

 

 

 

 

 

Notes receivable, net

$

431,801 

 

(4,943)

 

 -

 

426,858 

Investment in unconsolidated

 

 

 

 

 

 

 

 

real estate joint ventures

 

47,275 

 

 -

 

3,959 

 

51,234 

Property and equipment, net

 

112,858 

 

(929)

 

 -

 

111,929 

Other assets

 

121,824 

 

929 

 

 -

 

122,753 

Other liabilities

 

103,926 

 

 -

 

(462)

 

103,464 

Deferred income

 

36,311 

 

(19,418)

 

 -

 

16,893 

Deferred income taxes

 

43,093 

 

3,755 

 

1,120 

 

47,968 

Total equity

$

653,501 

 

10,720 

 

3,301 

 

667,522 



 

 

 

 

 

 

 

 

Statement of Operations:

 

 

 

 

 

 

 

 

Sales of VOIs

$

239,662 

 

2,355 

 

 -

 

242,017 

Cost reimbursements

 

 -

 

52,639 

 

 -

 

52,639 

Cost reimbursements

 

 -

 

52,639 

 

 -

 

52,639 

Cost of VOIs sold

 

17,439 

 

240 

 

 -

 

17,679 

Trade sales

 

142,798 

 

(713)

 

 -

 

142,085 

Net gains on sales of assets

 

2,442 

 

 -

 

(493)

 

1,949 

Cost of trade sales

 

97,755 

 

8,163 

 

 -

 

105,918 

Selling, general and administrative expenses

 

538,125 

 

(8,423)

 

 -

 

529,702 

Equity in earnings of unconsolidated

 

 

 

 

 

 

 

 

real estate joint ventures

 

14,483 

 

 -

 

(1,942)

 

12,541 

Income before income taxes

 

93,374 

 

1,662 

 

(2,435)

 

92,601 

Benefit for income taxes

 

7,223 

 

954 

 

1,525 

 

9,702 

Net income

 

100,597 

 

2,616 

 

(910)

 

102,303 

Less: Net income attributable to

 

 

 

 

 

 

 

 

noncontrolling interests

 

18,402 

 

(24)

 

 -

 

18,378 

Net income attributable to shareholders

$

82,195 

 

2,640 

 

(910)

 

83,925 

Basic earnings per share

$

0.83 

 

 

 

 

 

0.85 

Diluted earnings per share

$

0.79 

 

 

 

 

 

0.81 



10

 


 

 







 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

As of and for the Year Ended December 31, 2016



 

As Previously Reported

 

ASU 2014-09 Adjustments

 

ASU 2017-05 Adjustments

 

As Adjusted

Statement of Financial Condition:

 

 

 

 

 

 

 

 

Notes receivable, net

$

430,480 

 

(4,680)

 

 -

 

425,800 

Investment in unconsolidated

 

 

 

 

 

 

 

 

real estate joint ventures

 

43,491 

 

 -

 

5,901 

 

49,392 

Property and equipment, net

 

95,998 

 

(590)

 

 -

 

95,408 

Other assets

 

130,333 

 

590 

 

 -

 

130,923 

Other liabilities

 

95,611 

 

 -

 

(956)

 

94,655 

Deferred income

 

37,015 

 

(17,493)

 

 -

 

19,522 

Deferred income taxes

 

44,318 

 

4,711 

 

2,645 

 

51,674 

Total equity

$

495,454 

 

8,102 

 

4,212 

 

507,768